Euroclear Bank said that it is signing a memorandum of understanding (MoU) with the Korea Securities Depository (KSD) to usher in the wider use of Euroclear Bank-eligible securities as collateral by international counterparties when securing collateralised transactions with local Korean investment counterparties.
It added that the launch of the service, expected by June 2013, is part of its mission to create the first fully open global market infrastructure to source and mobilise collateral across geographic borders. Known as the Euroclear Bank global ‘Collateral Highway’, it will help market entities to move securities from wherever they are housed to serve as collateral to access central bank credit, secure transactions such as repos and loans, and post securities collateral with central counterparties (CCPs) as margin.
For Korea specifically, the Euroclear Bank/KSD agreement entails the greater uptake of electronic and efficient means to attain and keep open vital liquidity channels. It is expected to be highly useful in the two specific collateral management domains of secured loans and derivatives contracts which, until now, have been reliant on cash and Korean securities posted as collateral.
Upon the launch of the service, Korean entities will be able to secure securities lending and derivatives transactions using a possible range of over 600,000 securities eligible at Euroclear Bank, subject to the prearranged eligibility requirements which both trading parties have agreed to. The value of the secured loans segment in Korea is believed to be worth US$26bn (EUR 20 billion) and growing at double-digit annual rates. Furthermore, Korea is also widely deemed as one of the most mature and liquid derivatives markets in Asia.
Olivier Grimonpont, Euroclear general manager and regional head, Asia-Pacific, stated: “The agreement with KSD reinforces our commitment to the Asia-Pacific region and builds on many initiatives which we have started. In recent times, we have worked closely with our partners KSD to help them launch an off-shore Korean funds platform using Euroclear Bank’s investment fund processing technology. Beyond Korea, we are crystalising our mission of ‘post-trade made easy’ by cooperating with the likes of the Hong Kong Monetary Authority (HKMA) to strengthen cross-border access to liquidity and with Bank Negara Malaysia to extend the attractiveness of Asian bond markets to foreign investors.”
KSD’s chairman and chief executive officer (CEO), Kyung Dong Kim, added: “As the sole central securities depository (CSD) in the nation, my organisation oversees the issuance and circulation of 2,500 trillion worth of Korean Won [€1.8 trillion] securities. In an ever expanding global market space, it is only normal that our local clients look at bigger and better ways to attract trading counterparties from within the region, Europe and the Americas. This MoU with Euroclear Bank unlocks the door to wider cross-border business flows with their 1,400 clients based in over 90 countries.”
The US money market fund reforms came into effect in 2016 and are already dramatically shaping US fund industry with investors flooding out of prime funds and into government securities. While the reforms are similar, they are not the same. GTNews interviews Yeng Bulter, global head of the cash business at State Street Global Advisors on the differences.
There are various ways for financial institutions to benefit from advanced technologies and business models provided by FinTech's. Whether a business' approach is radical or incremental, data management can help a company to increase their return on investment, argues André Casterman, INTIX.
Tim de Knegt, strategic finance and treasury manager for the Port of Rotterdam, discusses how he is using blockchain, the challenges he will face in his role of treasury over the next 12 months and the advice he would give to someone starting out their career in treasury.
Due to the low interest rate environment and Basel III regulation many corporate treasurers, who may have in the past been very reliant on the banking sector to provide them with cash management solutions, have been forced to explore alternative options as banks have been refusing short dated cash deposits.